Public servants were unsure about the legality of the Robodebt scheme – an ultimately unlawful process to automatically send debt notices to Australian welfare recipients – well before it was implemented, the Royal Commission into the Robodebt Scheme has heard.

In late 2014, the legal team at the Department of Social Services was asked to provide legal advice about a proposed scheme to use income averaging, or ‘smoothing’, to raise debts against people on social benefits.

The proposed method involved taking a person’s income data from the Australian Tax Office (ATO), averaging it out over a year, and comparing it with income data the person self-reported to Centrelink.

When Robodebt began, a similarmethod was used to find discrepancies in income data and, if the person appeared to under-report their income, a debt would automatically be raised, notices sent out, and the debt collection process begun.

The Department wanted to know whether this method of smoothing was “legally defensible”.

When the legal advice came back it said, in essence, ‘no’.

“In our view, a debt amount derived from annual smoothing or smoothing over a defined period of time may not be derived consistently with the legislative framework,” it said.

On Tuesday, after a long legal delay to the Royal Commission’s fourth day of hearings, the man who asked for that legal advice took the witness stand.

Mark Jones was an Assistant Director of Payment Integrity and Debt Strategy at the Department of Social Services, parent of the Department of Human Services (DHS), when the Robodebt scheme was in its infancy.

Jones had been tasked with responding to a proposal from DHS – now Services Australia, which operates Centrelink – about income averaging.

Jones understood the proposal was important to Human Services because of “a combination of money raised and savings they could achieve” if the proposal went ahead.

He asked around, seeking advice from the Policy team which responded that they “would not support the proposal”.

“It’s flawed, as the suggested calculation method averaging employment income over an extended period does not accord with legislation which specifies that the employment income is assessed fortnightly,” one email read.

“We can't see how such decisions could be defended in a tribunal or court, particularly when DHS have the legislative authority to seek employment income information from employers.”

By the end of 2014, Jones and the team at Social Services had both legal and policy advice that didn’t support raising debts based on a method of income averaging scheme – but just a few months later, Jones was at his desk costing the proposal.

Senior Assisting Counsel the Commissioner Justin Greggery asked how this could be to which Jones replied "I can't recall”.

“At some stage, decisions were made to basically proceed with this, and then my role kicks back in to basically review any assumptions and do the costings,” he said.

Exactly how Robodebt continued in the manner it did despite administrative pushback so early on is what the Royal Commission aims to get to the bottom of, as Greggery said in his introductory remarks when hearings began this week.

“Of all the checks and balances already existing within the executive arm of the Commonwealth Government, they were apparently ineffective to cause even a suspension of the scheme in the face of its dogged pursuit by Services Australia and the then government,” he said.

“Indeed, one of the questions which this Commission must grapple with is how those checks and balances were ineffective on a number of occasions.”